In case you missed it, earlier this month the Federal Reserve decided to raise the interest rate by 0.25%.
What does that mean? Great question. Banks lend money to each other every day at the Federal Reserve's predetermined rate. Now, that rate has been bumped up a notch. It's a good sign, because it means they feel confident enough in the economy's strength that they don't have to lend money with rock-bottom interest rates.
Without getting too complex, raising the rate also makes sure that inflation stays in check and the cost of daily life doesn't get out of control.
But the important question for homeowners is how that increased percentage will affect everyday things like mortgages, auto loans and credit card rates. To find the answers, we did some digging and came up with some helpful information.
Mortgage Rates Are Holding Steady, For Now
Many experts said that a hike in interest rates wouldn't affect 30-year fixed rate mortgages (FRM). So far, they're right. According to the Primary Mortgage Market Survey, 30-year FRM's have held steady at around 3.96% for the past two weeks. 5-1 ARM's and 1-year ARMS have seen a slight increase.
Credit Card APR's Will Probably Go Up, But Not By Much
The Fed's interest rate is pretty closely linked to the Prime Rate, which is the base number credit card companies use to determine your APR when you apply for a card.
In fact, CBS News noted that shortly after the rate increase, Bank of AMerica, JPMorgan Chase and a couple of other major banks raised their Prime Rate from 3.25% to 3.5%.
Now, for those of you who are trying to pay off a credit card balance (thanks, Christmas!), 0.25% doesn't make a big difference if you pay your balance off within the next year. If you've got a $1,000 balance, a 0.25% increase represents $2.50.
Auto Loans Rates Aren't Expected to Rise Anytime Soon
As Americans have started to recover from the Great Recession, they've been more willing to spend money on new cars. Because of this, dealerships have been offering loans with low APR's.
This is a good sign, Edmunds.com Analyst Jessica Caldwell told CBS News. The car market is getting stronger, so raising loan rates isn't necessary at the moment.
"We don't expect auto loan rates to rise in the near term, especially with automakers continuing to offer successful low-APR promotions," Caldwell was quoted as saying. "As long as (shoppers) continue to respond to these deals, automakers will do everything in their power to continue offering them."
Are you convinced by what the experts have said about interest rates? Have you experienced any increased rates from credit card companies or from your home-loan lender? Thinking of refinancing? Let us know in the comments section below.